Last week I was reviewing handwritten notes on "Steps in the 1031 Like Kind Exchange Process" and requests from our clients. 1031 rules change, so this is It's something I do every year.
I noticed that a number of our clients had requested a " down home explanation" some good old-fashioned plain talk on the the steps they would need to take in doing an Eco-wise (any) 1031 Exchange. This year, I'm working on that request. But I want to say right up front that this attempt is from my experience and it is accompanied with the caveat that EXACT details must come from the experts...from a Qualified Intermediary for example. Your QI is your bridge to the future. S/he will handle details. To learn exactly what details click the link.
I have participated as the REALTOR in a good number of 1031 Exchanges with happy results and happy clients...and I am happy to apply down home talk, so I may be able to "translate into plain language"...and this is at least a beginning attempt.
Down Home Talk STEPS in the 1031 Exchange Process
___First,you need to figure out approximately how much net gain you'll have and if it's worth doing a 1031 Exchange. (Remember this is an investment opportunity over time.)
___Next, when you list the property, you will want to have specific language both in the Listing Agreement and in the Sales Contract (Seller and Buyer) ...Ask your REALTOR and your attorney about the specific text
____BE SURE (double check) the 1031 language is included in the Listing and the Offer to Purchase and Contract document. The language states your intent to use the property as a 1031 Like Kind Exchange.
___Before you list your old property (seller) or think about writing an Offer to Purchase and Contract for a replacement property get out your calendar. USE IT! Missing a date by just ONE day can mess up the entire transaction and make you liable for taxes.
___You need to use a "third party facilitator". This CANNOT be your personal CPA, your Real Estate Broker, or your personal Attorney, a person with whom you have worked closely within the last two years.. (See my notes on Qualified Intermediaries)
___MAKE SURE the Qualified Intermediary you choose has credentials through the Federation of Exchange Accomodators .Here is the member locator
Here is the list of FEA QIs for North Carolina:
____Remember, at the Closing, NONE OF YOUR PROCEEDS GO TO YOU! Proceeds MUST go to the facilitating Qualified Intermediary...so again, it is important that you select this person with care.
____Once funds from Closing have been transferred to your QI, you have 45 days to identify IN WRITINGto the QI, up to 3 properties, or a number of properties up to 200% of the fair market value of the relinquished properties.
___You have 180 days to close on the new property. (With a couple of exceptions) if you go past 180 days, you owe the taxes. USE YOUR CALENDAR!
____And once again, when you write an offer/contract for the replacement property special 1031 LANGUAGE MUST GO IN THE CONTRACT. Make sure (double check) you and your REALTOR spell out that this is a 1031 exchange.
Resource: Good questions to ask a Qualified Intermediary
Let me know how this works for you. I care.
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